Flag Theory aka The Perpetual Traveler

Let’s talk about Perpetual Traveler

This week, I did my first Live Stream interview – (https://www.facebook.com/RobertOKrukPage/videos/610478799470904/) and for the first time, I heard of the concept of Flag Theory.

What is Flag Theory?

According to Wikipedia, Flag Theory is a term used to describe the perpetual traveler.  An idea which proposes that individuals live in such a way that they are not considered a legal resident of any of the countries in which they spend time or operate. By lacking a legal permanent residence status, the theory goes, they may avoid the legal obligations which accompany residency, such as income and asset taxes, social security contributions, jury, duty, and military service.  The idea has been described as a “late capitalist nomadism”.

The perpetual traveler idea has been presented in terms of flag theory, wherein each flag represents one of the legal jurisdictions under which the perpetual traveler operates. The Three Flags Theory is credited to investment pundit Harry D. Schultz, who proposed that everyone should have a second passport and an address in a
tax haven and that their assets should be kept outside their home country. The idea was later expanded to Five Flags to include a place where money was earned and a place for recreation.

Whether to minimize governmental interference (via taxes or otherwise), or to maximize privacy, the theory proposes that each of the following should be in a separate country:

•  Passport and citizenship – in a country that does not tax money earned outside the country or control actions.
•  Legal residence – in a tax haven.
• Business base – where one earns one’s money, ideally somewhere with low corporate tax rates.
• Asset haven – where one keeps one’s money, ideally somewhere with low taxation of passive income and capital gains.
• Playgrounds – where one spends one’s money, ideally somewhere with low consumption taxes.

In 1995, financial commentator Bob Beckman commented about his residence in Monaco: “A long time ago, I was told that the most efficient way for an individual to handle his affairs was to work one place, keep his money in a second place and live in a third place. I live in Monaco. I don’t work here, my money is placed elsewhere, but managed from here.

Google the terms and quite a few websites pop up.  I didn’t know there was a name for this lifestyle choice.  But now that I found it, it seems to accurately reflect the way I see things.  Am I a Perpetual Nomad?  Seems like I am

What about the downsides of flag theory?

Flag theory, centered around diversifying one’s lifestyle internationally, offers numerous advantages, such as reduced taxes, decreased bureaucracy, and increased personal freedom.

However, it also carries certain drawbacks, including:

1. Cost: Traveling the globe and maintaining multiple residences can be expensive.
2. Loneliness: Embracing flag theory might distance individuals from their conventional communities and families, leading to feelings of isolation.
3. Complexity: Flag theory can be complex to implement and manage.
4. Legal risks: Potential legal risks are associated with flag theory, such as tax evasion and violating immigration laws.

Ultimately, whether or not flag theory is right for you depends on your individual circumstances and goals. If you are considering flag theory, it is important to weigh the advantages and disadvantages carefully before making a decision.

Here are some additional disadvantages of flag theory:

1. Identity and belonging: When you’re constantly moving around, it can be hard to feel like you belong anywhere. This can be especially challenging if you have family or close friends who cannot travel with you.
2. Limited access to essential services: Not being a legal resident in any country might hinder access to crucial services like healthcare and education, particularly for individuals with chronic illnesses or disabilities.
3. Culture shock and homesickness: Relocating to a foreign country, even temporarily, can be emotionally taxing, causing culture shock and homesickness, which might impede the adjustment process.

If you’re considering flag theory, knowing the potential disadvantages and advantages is important. Flag theory can be a great way to live a more flexible and fulfilling life, but it’s not for everyone.